Yahoo Finance Is Syndax Pharmaceuticals (NASDAQ:SNDX) A Risky Investment?
Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) makes use of debt. But the real question is whether this debt is making the company risky.
What Risk Does Debt Bring?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.
Check out our latest analysis for Syndax Pharmaceuticals
What Is Syndax Pharmaceuticals's Debt?
The image below, which you can click on for greater detail, shows that at June 2020 Syndax Pharmaceuticals had debt of US$19.9m, up from none in one year. But it also has US$189.7m in cash to offset that, meaning it has US$169.8m net cash.
A Look At Syndax Pharmaceuticals's Liabilities
The latest balance sheet data shows that Syndax Pharmaceuticals had liabilities of US$12.5m due within a year, and liabilities of US$32.5m falling due after that. Offsetting these obligations, it had cash of US$189.7m as well as receivables valued at US$245.0k due within 12 months. So it can boast US$145.0m more liquid assets than total liabilities.
This surplus suggests that Syndax Pharmaceuticals is using debt in a way that is appears to be both safe and conservative. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that Syndax Pharmaceuticals has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Syndax Pharmaceuticals can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
In the last year Syndax Pharmaceuticals's revenue was pretty flat, and it made a negative EBIT. While that's not too bad, we'd prefer see growth.
So How Risky Is Syndax Pharmaceuticals?
We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Syndax Pharmaceuticals lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$58.6m and booked a US$63.0m accounting loss. However, it has net cash of US$169.8m, so it has a bit of time before it will need more capital. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 3 warning signs we've spotted with Syndax Pharmaceuticals .
If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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